Energy giant forecasts robust growth as natural gas overtakes coal to become second largest source of global energy
Global LNG volumes are expected to experience significant growth over the next twenty years, with rising exports from North America and the Middle East destined to supply energy-hungry markets in China, India and other emerging markets in Asia. The result, according to analysts at energy giant BP, will be a more competitive and globally-integrated gas market in order to meet the world’s need for more energy but less carbon.
Natural gas demand is set to grow at 1.7 per cent per annum, increasing nearly 50 per cent by 2040, a much faster rate than either oil or coal, beaten only by renewable energy, which is the fastest growing source of energy, contributing half of the growth in global energy supplies. Gas it set to overtake coal to be the second largest source of global energy, converging with oil by 2040.
Liquefied natural gas (LNG) is key to this robust outlook, with the development of LNG facilities increasing the availability of gas in key markets around the world. According to the 2019 edition of BP’s widely read Energy Outlook, the global LNG trade is set to more than double to reach almost 900 billion cubic metres in 2040, up from 400 BCM in 2017, and will account for more than 15 per cent of total gas demand, overtaking inter-regional pipeline shipments in the late 2020s.
The increase in LNG exports will be led by North America, followed by the Middle East, Africa and Russia. As the LNG market matures, the US and Qatar will emerge as the main centres of LNG exports, accounting for around 40 per cent of all LNG exports by 2040.
On the demand side, Asia remains the dominant market but the pattern of imports is set to shift as China, India and “Other Asia” overtake the more established markets of Japan and Korea to account for around half of all LNG imports by 2040. Europe remains a key market, both as a ‘balancing market’ for LNG supplies and a key hub of gas-on-gas competition between LNG and pipeline gas. With domestic gas production in decline, Europe’s import dependency is expected to increase to around three-quarters in 2040, from 50 per cent now, and, while piped gas from Russia is expected to have a cost advantage over LNG imports, geopolitical considerations around security of supply may yet favour LNG.
In China, import dependency is expected to rise to over 40 per cent by 2040, with around half of these additional imports met by incremental pipeline capacity from Russia and other CIS countries, and the remainder from LNG. As in Europe, however, the exact mix will be influenced by security of supply issues, said BP.
The analysts make clear, however, that the trajectory of LNG volume growth will depend on the pace of investment required to build out the necessary facilities and infrastructure. “The cyclical nature of LNG investments means there is a risk that the development of the LNG market will continue to be associated with periods of volatility,” the analysts noted in the report, which is required reading for all those working in the energy industry.
Those keen to learn more about BP’s views on the future of the LNG industry should head for Shanghai next month, where executives from the energy giant will be speaking at LNG2019, the world’s largest LNG event. Speakers include Group Chief Executive Bob Dudley, who will be speaking in a Plenary Session, LNG: A Sustainable Fuel for a Sustainable Future. Bernard Looney, Chief Executive of Upstream, will speak in a Spotlight Session, addressing the importance of managing methane emissions as part of a sustainable energy future while BP’s Head of International Gas, David Knipe, will discuss The New LNG Landscape – Challenges and Opportunities.
The BP team will be joining more than 240 international speakers, who will take to the stage on April 1-5 to address more than thousands of industry professionals from all over the world. Other confirmed speakers include the heads of some of the biggest players in the global LNG market, such as Darren W. Woods, Chairman & Chief Executive Officer of Exxon Mobil Corporation, Ben van Beurden, Chief Executive Officer of Royal Dutch Shell Plc, Gazprom’s Alexey Miller and Qatar Petroleum’s H.E. Saad Sherida Al-Kaabi.
LNG2019 is also the only event where the industry will be able to see the heads of the big three Chinese energy giants on stage together in 2019, making this a must-attend event given that China is now the world’s fastest growing LNG market. The confirmed speakers are Hua Yang, Chairman of China National Offshore Oil Corporation (CNOOC), Yilin Wang, Chairman of CNPC, and Houliang Dai, Chairman of Sinopec.